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The Energy Information Agency reported crude inventories rose 2 million barrels for the week ended March 13, in line with analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos.

Yet gasoline stocks surged by 3.2 million barrels, which shocked analysts who had expected a draw down of 2.1 million barrels.

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Prices have recently been bolstered by renewed optimism in stock markets, which oil traders often use to measure overall investor sentiment about the economy. Still, months of massive layoffs, falling consumer demand and weak corporate profits have left some traders wary that the drop in crude demand reached a bottom.

"We're seeing a bit of a sell-off after such a strong run-up'' in oil prices, said Michael Lynch, president of Strategic Energy & Economic Research.

OPEC has been slashing production in hopes of drawing down a global surplus of crude. Oil has been trading well below OPEC's comfort level and the national budgets of some member countries are under strain.

On Wednesday, Iranian Oil Minister Gholam Hossein Nozari said that a plunge in crude prices has forced his country to pull money from other parts of its budget to support the oil industry.

Nozari, who spoke at an OPEC meeting in Vienna, told The Associated Press that while some fields were still profitable at current prices, production at others had to be subsidized to maintain output at over 4 million barrels a day.

Falling oil prices also forced Iranian President Mahmoud Ahmadinejad to propose an unpopular tax hike and plans to scrap costly state subsidies for fuel, water and electricity.

The Organization of the Petroleum Exporting Countries decided against shutting down production more than the previously announced cut of 4.2 million barrels per day. Instead, leaders said they'll rein in wayward members of the 12-nation group and make sure everyone is cutting as much as promised.

Gas prices rose a penny overnight to a national average of $1.92 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Gas is 4.5 cents cheaper than a month ago and $1.36 cheaper than a year ago.

In other Nymex trading, gasoline for April delivery tumbled 8.4 cents to $1.34 a gallon, while heating oil dropped 0.29 cent to $1.2457 a gallon. Natural gas for April delivery fell 6 cents to $3.752 per 1,000 cubic feet.

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